The IoT Will Kill the Sales Funnel

The rise of intelligent machines, the move toward subscription-based services and the growth of the sharing economy are all conspiring to impact the way companies sell products. Here's why that is a good thing.

When a manufacturer sells a magnetic resonance imaging (MRI) machine to a hospital, that sale represents the hard work of a dedicated sales team that has gone through a process to create a needs analysis, tested the functional specs and generated a financial proposal. That effort often takes months and can be charted in the sales funnel of the company's customer relationship management (CRM) platform. But what happens to the conventional sales process when the machine in question is able to order its own replacement?

Through remote monitoring and support, the Internet of Things is already transforming how health-care providers use MRI machines, by reducing downtime and automating scheduling, which allows a single machine to serve more patients. Proactive fulfillment capabilities means a machine can order its own supplies and, as a result, eliminate costly shortages and surpluses. The impact of the IoT beyond health care and MRI machines will be breathtaking—Cisco predicts that there will be 50 billion connected devices by 2020—and it's clear that business models, as a result of this device revolution, will radically change and sales funnels will collapse.

Software By Subscription
As it turns out, subscribers are better than buyers because a subscription model establishes a persistent relationship between buyer and seller. Once a business subscribes to a service, there's a lot less friction when it comes to renewing or adding the next service. Achieving a lower cost of acquisition has always been a goal of subscription models, but as the IoT automates things like upgrades, support and cross-selling, subscriptions will effectively scale themselves.

In the very near future, many common consumer and capital purchases will be wrapped and bundled in services. We see examples of this in telecommunications, in which business mobile phone plans package devices with rate plans for a monthly fee. Incremental sales occur, such as when a business hires a new employee, but the utility of the sales funnel is limited once the initial plan is purchased.

Light Bulbs and the Value Proposition of IoT Subscriptions
In one future of IoT business models, light bulbs—you'll pardon the pun—can shed light on just how omnipresent IoT-powered services could become.

Several companies currently sell the so-called smart light bulb. As connected devices, these bulbs can be programmed to turn on and off at the tap of a smartphone or touch screen, or they can be scheduled to go on and off through the manufacturer's own back-end services. But those are light bulbs you would buy individually at retailers like Home Depot.